This article is a rewritten and expanded version of the original Forex forecast published by James Stanley on Forex Factory. Full credit goes to the original author for the analysis and insights. The content below is revamped and elaborated for clarity, depth, and readability, ensuring it surpasses 1000 words.
Weekly Forex Forecast: DXY, EUR/USD, GBP/USD, USD/JPY
By James Stanley (original author)
Rewritten and expanded for educational purposes
The week ahead in the forex market holds several critical themes. While the US Dollar has seen some hesitation around resistance, the overall macroeconomic environment and technical levels are beginning to show clearer direction. In this updated weekly outlook, we delve into forecasts for major currency pairs: the US Dollar Index (DXY), EUR/USD, GBP/USD, and USD/JPY.
This week, traders should remain vigilant of upcoming economic reports, central bank signals, and the ongoing macroeconomic tug-of-war between inflationheadwinds and policy expectations. Here is a detailed breakdown of each asset with technical and fundamental insights.
US DOLLAR INDEX (DXY): Awaiting Breakout Confirmation
The US Dollar Index (DXY) endured whipsaw price action last week but ended slightly higher. On the weekly chart, DXY maintains its uptrend structure, pushing against a notable longer-term resistance. This converging price behavior suggests that a breakout could materialize soon.
Key Technical Overview:
– Support holding firm above 103.00, signifying demand strength at lower levels.
– Resistance near 105.00, which previously capped upside in April and May.
– Longer-term bullish trendline remains intact, reinforcing underlying momentum.
Key Factors Driving DXY:
– The Federal Reserve’s cautious tone regarding interest rate cuts continues to support the dollar. Despite market anticipation for late-2024 rate reductions, FOMC officials have broadly signaled hesitance without substantial inflation moderation.
– Overall macro uncertainty has buoyed safe-haven demand, indirectly propping up the dollar, particularly during risk-off environments in equity markets.
Forecast for the Week:
– A consolidation near 105.00 could set the stage for a potential breakout. If DXY breaks above 105 decisively, next targets lie at 106.20 and then 107.00.
– A failure to break resistance might result in a pullback toward the 104.20 area, where prior support and the 50-day moving average intersect.
Traders should monitor high-impact US data releases, particularly inflation metrics and employment numbers, as they can serve as catalysts for directional movement.
EUR/USD: Testing Support with Downside Pressure
After a failed attempt to reclaim the 1.0900 handle earlier this month, the EUR/USD pair has retraced and now tests a critical support zone. The euro’s weakness reflects both the relative strength of the US dollar and divergent central bank policies.
Technical Landscape:
– Strong support around 1.0670 to 1.0700. This zone has held on multiple occasions over the past six months.
– Resistance aligned with the 200-day moving average near 1.0820.
– Downward-sloping trendline from the 2024 high remains a pressure point, capping near-term rallies.
Fundamental Headwinds for the Euro:
– The European Central Bank (ECB) has struck a slightly dovish tone recently. While ECB officials continue to emphasize data dependence, some members have hinted at gradual easing, especially against a backdrop of subdued inflation in the Eurozone.
– German, French, and Italian economic data continue to show softness, weighing on euro sentiment.
Outlook and Key Levels This Week:
– If EUR/USD breaks below 1.0670, more downside risk opens toward the 1.0600 psychological level, followed by a deeper move down to 1.0520, a key low tested earlier this year.
– On the upside, a recovery above 1.0750 and a break of the 1
Read more on EUR/USD trading.